Gold prices fall on inflation data, rate cut expectations

Investing.com – Gold prices edged lower in Asian trading on Wednesday before investors cast doubt on the Federal Reserve’s early interest rate cut.

Much of the focus is on upcoming U.S. consumer price index data, which could show U.S. inflation held steady in December.

Gold prices fell sharply last week as traders began to worry about when the Federal Reserve might start cutting interest rates, whether as early as March 2024. This view has led to a sharp rise in copper prices, which has also weighed on gold prices.

However, after easily topping $2,000 an ounce in early December, gold prices have managed to hold on to $2,000 an ounce. Gold prices will rise by about 10% in 2023.

Prices were steady at $2,029.30 an ounce as of 00:28 ET (05:28 GMT), while February futures were steady at $2,034.65 an ounce.

Thursday’s expiration is expected to see inflation rise slightly in December. Stable inflation, coupled with recent signs of recovery in the labor market, gives the Fed room to keep interest rates higher for an extended period into the future.

Most investors in the market are reducing bets that the Federal Reserve could start cutting interest rates as early as March 2024. It said the probability of a 25 basis point interest rate cut in March was 63% to 0.6%, lower than the 69.6% probability. Was seen a week ago.

While the Fed has signaled it will eventually cut interest rates in 2024, it has provided little information on the timing of such cuts. The central bank has so far maintained a rate-cutting approach driven largely by inflation data.

A higher purpose provides an opportunity cost for investing in gold, but investing in gold is unprofitable. This trade has put pressure on gold over the past two years, with steady gains in gold prices pointing to expectations of lower interest rates in 2024.

Among industrial metals, copper prices edged higher on Wednesday after falling sharply over the past week on growing concerns about slowing demand this year.

The March deadline rose 0.3% to $3.7717 per pound, but so far in 2024 it is trading down more than 2%.

A slew of dangerous economic data from around the world has weighed on copper prices, with weak quarterly data from top importer China becoming a major point of contention. Markets are convinced that slowing economic activity will reduce demand for money this year, especially as the impact of high interest rates is weighing on the economy.

For now, the focus is on Friday’s data from China for further signals on the world’s largest copper importer.